This morning, The Washington Postdatedconfirms that yesterday’s attack on the U.S. Embassy in Baghdad was the work of a group known as the Soldiers’ Brigade of Yemen, an affiliate of al Qaeda, using techniques that they may have learned while fighting in Iraq:

[T]he first vehicle exploded near a guard post. Cameras then recorded attackers taking positions nearby, until a second vehicle packed with explosives detonated near a sidewalk. . . . The use of two vehicle bombs — one to breach the perimeter of a compound, a second to drive inside and explode — is a tactic used by the Sunni insurgent group al-Qaeda in Iraq.

Matt Duss over at Think Progress demonstrates how this blows away yet another justification for the Iraq war — the “we’re fighting them over there so that we don’t have to fight them over here” idea, also known as the flypaper theory:

Those who have been following the Iraq debate might remember â€œflypaper theory,â€ which was one of the earliest exponents of the â€œincoherent post hoc justifications for the Iraq warâ€ genre. The idea was that there was some limited number of terrorists in the Middle East, and the presence of an occupying U.S. army would lure them to Iraq, whereupon they could all be conveniently killed, presumably as soon as they stepped off the bus.

This plan was prevented from working only by the fact that it was staggeringly dumb. The U.S. occupation radicalized scores of young Muslims, many of whom traveled to Iraq, where they learned terror warfare and were galvanized in the global jihad. And now theyâ€™ve begun returning home, to share the tactics and technology developed in a laboratory we provided for them by invading Iraq.

Of course, that doesn’t even take into account the role of torture, Guantanamo, Abu Ghraib and other such obscenities in helping to radicalize Muslims as well.

To put it another way, the Bush Administration have spentÂ billions upon billions of dollars on the Iraq War, largely based on the bankrupt theory that we are building an island of democracy that will de-radicalize the Middle East.Â In reality, we have made things far worse than they would have been had we never invaded, so much so that we have unthinkingly created another generation of terrorists, in the process weakening ourselves to such a degree that we may not be able to fight back the next time the come “over here.”

Imagine how bad things would be if Bush had taken a similar approach to the economy.

Not to go all Paul Kennedy on y’all, but I was struck by the last three paragraphs in a story in the Washington Postdated this morning:

Analysts said one of the biggest impacts of the crisis is to undo the long-held image of the United States as a fail-safe place to invest money. Hundreds of billions of investment dollars have poured into the United States in recent years, much of it from Asian economies where a powerful culture of individual savings contrasts with the earn-and-spend philosophy of the United States.

Many of those Asian investors were feeling burned by the failure of U.S. institutions once promoted as the safest of bets. Though Asian and Middle Eastern sovereign wealth funds lavished rescue money on U.S. lenders earlier this year, those funds appeared to be showing increasing caution.

“The big risk for the United States is that people will begin to feel that we really don’t know what we’re doing and lose complete confidence in the Federal Reserve, the Treasury and the U.S. financial system,” said Edwin M. Truman, senior fellow at the Peterson Institute and a former Treasury assistant secretary. “That hasn’t happened yet, but it is a risk.”

Talk about burying your lede.Â The big story isn’t that governments around the world are moving to “stanch panic,” as the Post headlines the story, but rather that other governments — and perhaps more importantly, investors — no longer view the United States as a “fail-safe place to invest money.”

Contrary ThePost’s assessment that investors have yet to give up on the U.S., The International Herald-Tribune is reporting that Asian investors may already be losing faith in the United States:

Tremors from Wall Street are rattling Asian confidence, leading many investors to question the wisdom of being invested in the United States to the tune of trillions ofÂ dollars.

Asian investors were starting to show hesitation even before the financial earthquake of the last week. Now, a wariness toward the United States is setting in that is unprecedented in recent memory, reaching from central banks to industrial corporations, from hedge funds to the individuals who lined up here to withdraw money from the American International Group onÂ Wednesday.

Asian savings have, in essence, bankrolled American spending for decades, and an Asian loss of confidence in American financial institutions and assets would have dire consequences for the U.S. government and AmericanÂ taxpayers.

Damn straight it would.

But individual Asian investors are not the only ones who have kept the good times rolling in the United States.Â As you may or may not know, one of the biggest sources of capital flowing into the United States over the past few are sovereign wealth funds — state-owned investment funds created by governments when they have budgetary surpluses.Â Think of them as a government’s rainy day fund, designed to help avoid boom and bust cycles.

Guess where may sovereign wealth funds have been investing?Â In the American banking sector, including Morgan Stanley and Merrill Lynch.Â As Inspector Clouseau once said in one of the Pink Panther movies, not anymore.

As the American investment banking industry seems to teeter, many investors are asking why the sovereign wealth funds from the Middle East have not stepped up.

Less than a year ago, the funds spent billions of dollars for minority stakes in Wall Street banks. As oil prices peaked near $145 a barrel this year, the Middle East sovereign wealth funds amassed even more cash. Still, even as the values of banks like Goldman Sachs and Morgan Stanley are swooning, Middle East funds are not biting.

The explanation is simple, bankers in the region say. Plenty of other, more attractive assets are out there right now. With markets having been hit by the global downturn, compelling, value-priced deals are numerous â€” from sports teams in Britain and publicly traded companies in Russia to deals closer to home, like Middle East infrastructure buys, Youssef Nasr, chief executive of HSBC Bank Middle East, said.

When investors decide that their money would be safer in a British soccer team than in an American bank, I think we can take that as a pretty good sign that we’re in serious trouble.

For far too many years, Americans have been able to sustain our lifestyles in large part because Middle Eastern and Asian investors saw it in their best interests to prop up the American economy.Â They’ve bankrolled the consumer boom and the real estate bubble, blithely confident that investing in the United States was the safest possible bet.

Right now they’re feeling burned.Â The big question is whether that’s a temporary phenomenon or a permanent shift.Â If it’s the latter, and you’re wondering what the consequences for the U.S. economy will be, think Lehman Brothers on a national scale.

Much to my shock, I agree with Senator Grouchy McGrouchypants.Â I also think FEC Chairman Donald McGahn should resign, largely because of the FEC’s recent failure to investigate your own skirting of federal campaign finance law.

I know, we all make mistakes, right?Â And it’s been, oh, I don’t know, 24 hours since you made one — when you said you would fire Christopher Cox, the Chairman of the SEC, even thought a President doesn’t have the authority to fire heads of independent regulatory agencies.Â And it’s been a full two days since you mistook Spanish Prime Minister Jose Luis Rodriguez Zapatero for Commandante Marcos of the Zapatista National Liberation Front.Â So maybe we should cut you some slack.Â After all, you did finally figure out that the FEC SEC chairman can’t be fired, so that’s somewhat of an improvement.

I have just one question for Senator McCain about this whole SEC chair firing/resignation thing:Â if Christopher Cox does resign, doesn’t that mean that President Bush gets to appoint a new one?Â And didn’t Bush pick Cox in the first place?Â So won’t we be virtually guaranteed the same freaking problems we have now?

Actually I have a second question for him.Â Â When the Senate confirmed Cox on July 29, 2005, it was by acclamation. In other words, unanimously.Â That means both you and Barack Obama, if you were on the floor of the Senate at the time, supported him.Â But Obama isn’t (yet) calling for Cox’s removal.

Cox’s nomination to serve was considered by the Senate in the summer of 2005, at a time when McCain was positioned, as chair of the Senate Commerce Committee, to raise any concerns he might have had — and even to hold hearings — about the selection. As McCain, himself, bragged this week: “I understand the economy. I was chairman of the Commerce Committee that oversights every part of our economy.”

While that statement was a bit of a stretch, it is reasonable to suggest that the Commerce Committee chair could have identified an opening (perhaps through the committee’s responsibility for overseeing interstate commerce) to hold a hearing and raise concerns about Cox.

Instead, McCain made no complaint and ceded responsibility for reviewing the Cox nomination to the Banking Committee, which has primary responsibility for reviewing SEC nominations. The Banking Committee gave Cox a predictable free ride from the Wall Street-friendly Republicans and Democrats who pack the panel.

Does that mean that you were for Cox before you were against him?

Oh, and that makes me think of yet another question.Â Wasn’t Cox rumored to be on your shortlist for VP?

I think Christopher Cox will make an excellent choice as McCain’s VP based on a lot of the information I gleaned from here and here. Some are going to tell me that the problem with Chris Cox is that he is not former Gov. Mitt Romney or current Gov. Tim Pawlenty. The argument that Romney can help McCain in Michigan and Pawlenty can help McCain in Minnesota. My purpose is not to make a case against a VP pick, and I do not have anything against them. I just think that there is a good case for a Minnesota born pro-life Chris Cox to be a help and not a hindrance as his VP.

So maybe you were for Christopher Cox before you were really for him before you were conveniently against him.

Another great point from the only VP candidate actually qualified to hold the job:

COURIC: Your vice presidential rival, Governor Palin, said “To the rest of America, that’s not patriotism.Â Raising taxes is about killing jobs and hurting small businesses and making things worse.”

BIDEN:Â How many small businessmen are making one million, four hundred thousand–average in the top 1 percent. Give me a break.

I remind my friend, John McCain, what he said–when Bush called for war and tax cuts–he said, it was immoral, immoral, to take a nation to war and not have anybody pay for it. I am so sick and tired of this phoniness.

The truth of the matter is that we are in trouble.Â And the people who do not need a new tax cut should be willing, as patriotic Americans, to understand the way to get this economy back up on their feet is to give middle class taxpayers a break. We take the tax cut they’re getting and we give it to the middle class.

If there was a significant sector of the U.S. economy that was bleeding red ink, doing serious damage to the savings of individual citizens preventing American businesses from being competitive, and genrally dragging things down, you’d want the government to take action, right?

Sure you would.

Okay, a second question, then.

If it’s okay for Republicans to prevent the banking and insurance industries from melting down, why is it socialism when Democrats urge similar action on health care?

1.Â The only thing missing are bullet points highlighting the key points in the plan.Â I think that would have been more effective than keeping the web address up the whole time.

2.Â The big question is whether people are willing to spend two minutes watching this.

Ironically, given my critique of Gerson’s column earlier today, this is exactly what Gerson suggested he do.Â But I still don’t think that this precludes him from also hitting back.Â And I remain convinced that Gerson is shifting the blame by arguing that it is somehow Obama’s fault that McCain has become a lying liar who lies about lies.

Josh Marshall puts John McCain’s promises to clean up Wall Street in context:

John McCain’s top economic advisor, former Sen. Phil Gramm, is the guy who authored the deregulation law that most agree is the ultimate cause of today’s financial meltdown. Tomorrow’s and probably next week’s too. But let’s not get ahead of ourselves. John Thain, CEO of Merrill Lynch, which swirled into brokerage oblivion today, is one of McCain’s top economic advisors too. And now McCain says he’s going to clean up the mess by putting in tighter regulations and oversight even though he’s always supported lax oversight and his top economics guy is the one who loosened the rules in the first place.

Here’s part of what Barack Obama said today about the problems plaguing Wall Street:

The situation with Lehman Brothers and other financial institutions is the latest in a wave of crises that are generating enormous uncertainty about the future of our financial markets. This turmoil is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, save for their future, and make their mortgage payments.

The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren’t minding the store. Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression.

We’re working through a difficult period in our financial markets right now as we work of some of the past excesses, but the American people can remain confident in the soundness and resilience of our financial system. . . . We’ve got excesses we need to work through and we need to work through them as quickly as possible, and I think we’re making progress.

I appreciate the fact that Paulson is, along with Bernanke, doing his best to prevent a total meltdown of the economy, and I recognize that both men are largely trying to fix problems created by their predecessors.Â But come on — who exactly does Paulson think was responsible for the “excesses” that brought about this mess?Â Or is the Bush Administration going to try to do what they did with 9/11: blame it on the Clinton-Gore team?

The reality is that for the past seven (nearly eight) years, the Bush Administration has allowed the rich to play with everyone else’s money in ways that has left many Americans exposed to real risk.Â In the process, it also has failed to fix many any of the other problems the country is facing — a weakened industrial base, an eroding infrastructure, a blooming debt, a growing climate crisis, a continued dependence on foreign oil, and a declining dollar, just to name the first six that come to mind.

I do not discount the role played by people who bought houses they could not afford.Â But who allowed the market to exist in the first place?Â Who ignored the problems we faced until it was too late?Â Republicans’ arguments that this is all somehow the fault of people who took out sub-prime loans is little more than blaming the victim.Â That is so typical of Republicans:Â blame the middle class and the poor for the fat cats’ mistakes.

Should things really go south, there really isn’t a safety net capable of preventing the slide.Â Face it:Â we’re broke.Â As a government, we’re no different that Lehman Brothers:Â our debits exceed our assets.Â Do people really think that the Chinese are going to continue to bail us out, especially now that they’re beginning to find other markets for their goods?Â (For the Chinese perspective, read between the lines of this piece.)

Large segments of the world would like nothing better than to see the United States economy crash and burn.Â Yes, there will be some short-term impact on global markets, but the reality is that the rest of the world will quickly find that it can live quite well with a weakened United States.

This is, in many ways, even worse than the Depression, even if the final economic consequences prove not to be as dire (something we are not yet assured will be the case):Â this time, the government doesn’t have the ability to turn this around.Â Unless, of course, Ã la Zimbabwe, we start printing worthless money (but of course that just creates a new set of problems).

I don’t know whether Obama or McCain or anyone can reverse this slide.Â I do know that an Obama administration would be far more likely to convey the reality of the situation than a McCain administration.Â An Obama administration would be able to work with a Congress more likely to act on his prescriptions.Â But that doesn’t mean that what he wants will work.

In my gut — and that’s all it is at this point — I can’t help believing that this isn’t merely the start of another recession/depression.Â It feels much more like the beginning of America’s slide off the top of the pyramid.Â I hope I’m mistaken.

In the meantime, you might want to go back and take a look at this James Fallows piece from 2005.Â He gets some of the details wrong, but I think he’s scarily on target in terms of the big picture.

Wall Street might just be in free fall.Â Rick Perlstein got an email from a friend on Wall Street who writes,

The collapse of Wall Street will hit Main Street like Ike hit Houston.

That’s not good news, but it misses the point.Â The most important question is, will Treasury and the Federal Reserve respond to the collapse of Wall Street like FEMA and DHS did to Katrina?Â Because if they do, we’re completely, totally, utterly screwed.

A lot of bloggers and pundits have been obsessing over the following passage from yesterday’s story in The Politico:

The McCains increased their budget for household employees from $184,000 in 2006 to $273,000 in 2007, according to John McCain’s tax returns.

I understand the reason why people are talking about this — rich people paying servants is not a good image.

But there’s a bigger point here:Â how many people are covered by this sum?Â Because rich people paying servants poorly is an even worse image.

Let’s do the math here.Â Or at least what I think the math might be.

To comply with federal law, McCain, Inc. has to pay both state and federal employment and insurance taxes.Â I’m guessing they also provide health insurance.Â Not so sure about a retirement plan, but for now, let’s say the answer is no.

Even without retirement, taxes and benefits are still a significant chunk of change.Â For the moment, let’s assume that they are equal to about 25 percent of each employee’s total compensation (wages + taxes + benefits).

Okay.Â We know they have at least eight homes.Â For argument’s sake, let’s say that three of these are rental properties or otherwise not used by the family.Â That leaves five homes.Â I’m guessing that you can assume a maid or cook at each.Â So that’s at least five employees.

Two of the five places are condos, but the other three are homes (I think).Â So let’s assume a gardner/lawn care person for each.Â That’s now eight employees.Â But the Arizona estate probably takes more than one person to care for the lawn.Â That’s nine.Â And let’s assume that at their main residence, there’s both a maid and a cook.Â That’s ten.

So I think I’m being fairly conservative in guesstimating that the McCains have ten household employees.

Now let’s look at that number again:Â $273,000.

$273,000/10 = an average of $27,300 per employee.Â But that doesn’t take into consideration the cost of taxes and benefits, which we’ve assumed are 25 percent of each employee’s total compensation.Â So…

$27,300 x .25 = $6,875

$27,300 - $6,875 = $20,475

According to Wikipedia, the poverty threshold for a four-person family in the continental United States is $21,200.

John McCain’s family owns at least eight properties â€” not the seven Democrats are alleging or the four McCain’s staff identified â€” according to a Politico analysis of property and tax records, as well as interviews.

The presumptive Republican nominee, though, may have some wiggle room in explaining why he couldn’t immediately provide an answer when asked by Politico how many houses he and his wife, Cindy, own. Sen. McCain himself does not own any of the properties. They’re all owned by Cindy McCain, her dependent children and the trusts and companies they control.

Brian Rogers, a McCain spokesman, did not question Politico’s analysis, but said his boss’s bungling of the how-many-homes question is a nonissue.Â “Voters care a lot more about candidates’ personal ethics than about how many houses or residences or doghouses that John and Cindy McCain own,” he said.

Whoopsie!Â I think that’s statement number four.Â Not that they’re worried or anything.

I wouldn’t want to be in Mr. Rogers’ shoes right now.Â He’s beginning to sound like Kevin Bacon at the end of Animal House, screaming “everyone stay calm!!!” over and over again, getting more and more hysterical in the process.

One common theme in this tidal wave of Rogersian retorts is Tony Rezko:

[Rogers] questioned efforts by McCain’s Democratic rival, Barack Obama, to exploit the issue, given that Obama benefited from a 2005 land deal with the wife of convicted Chicago businessman â€” and former Obama fundraiser â€” Tony Rezko that expanded the Obama family’s newly purchased $1.65 million homestead.Â “The reality is that Barack Obama purchased his million-dollar mansion in a shady deal involving a convicted felon, and it raises questions about his ethics and judgment,” said Rogers.

The problem for the McCain campaign is that the Rezko issue is old news, having pretty much played out during the primary.Â Sure, their lickspittle surrogates Fox News, Washington Times, Rush Limbaugh and their ilk will go along with their messaging, but I have my doubts that the MSM will buy the ethics ploy.

Furthermore, do they really want to open that door?Â Are they sure there are no skeletons in the one of the many closets now owned by the McCains?Â Are they absoutely positive that Cindy’s family never did anything unethical?Â I’m not suggesting that they did do anything wrong.Â But playing the ethics card is basically a dare to the media to “bring it on.”

And sooner or later, the rich girl quotes from Cindy are going to start to do damage.Â Take this one, for example:

When I bought the first [condo in Coronado, outside San Diego], my husband, who is not a beach person, said, ‘Oh this is such a waste of money; the kids will never go,’” she said in Vogue. “Then it got to the point where they used it so much I couldn’t get in the place. So I bought another one.”

Just the other day I asked myself: self, how many pens do you have? And honestly, I just couldn’t remember. Did I or did I not put a ballpoint from the Karachi Sheraton in my briefcase by mistake? And what about the one that sort of exploded the other day while I was checking my phone messages: did I actually throw it away? And the one I bought in a moment of folly back in the 80s, the one with the sparkly green ink that has completely dried up because I never actually used it: is it still lurking somewhere in my office?

That’s how the super-rich think of real estate:Â interchangeable objects to be used and then discarded.Â At least that’s what I said to Molly while we were driving to our chalet in the Adirondacks last week.Â Or was it the week before, when we were visiting our beach house in Tahiti?

I can never keep those damn houses straight.

If the number of McCain mansions keeps growing, Mr. Rogers is going to have to find a different neighborhood, one that doesn include increasingly monotonous attacks on Obama’s character.

Sen. John McCain (R-Ariz.) said in an interview Wednesday that he was uncertain how many houses he and his wife, Cindy, own.Â Â “I think â€” I’ll have my staff get to you,” McCain told Politico in Las Cruces, N.M. “It’s condominiums where â€” I’ll have them get to you.”Â Â The correct answer is at least four, located in Arizona, California and Virginia, according to his staff. Newsweek estimated this summer that the couple owns at least seven properties.

This could be a game-changer.Â In fact, it could turn out to be McCain’s grocery scanner moment:Â evidence that he is out of touch with the average American’s economic troubles.

McCain v. Minnesota has additional details.Â The kicker:Â the combined properties are worth $13.8 million. Thirteen. Point. Eight. Million. Dollars.Â No wonder McCain thinks that you have to have a net worth of $5 million to be rich.

And less than 24 hours later, Obama has a response:

Brilliant.Â Devastating.Â To the point.Â Wonder if anyone is researching how many houses Britney and Paris own?

Two other observations:

1.Â In this and other negative ads, Obama frontloads the “I’m Barack Obama and I approved this message.”Â In bio and positive issue ads, it happens at the end.Â I can’t say that it’s true 100 percent of the time, but it looks like a trend.Â There must be a reason for it.

2.Â As Thomas Frank noted in What’s the Matter with Kansas?,Â many Americans want to believe that that anyone can get rich — that’s why they vote for Republicans even though it is not in their best interests. Â Obama’s instincts are right on this, but he has to be careful to appeal to Americans’ populist anger without denying them their dreams of prosperity.